UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 1997

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from __________________ to ___________________

Commission File Number 333-06585

CROSS-CONTINENT AUTO RETAILERS, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 75-2653095
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)

1201 S. TAYLOR
AMARILLO, TEXAS 79101
(Address of principal executive offices) (Zip Code)

(806) 374-8653
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .

Number of shares outstanding of each of the issuer's classes of common stock, as
of November 12, 1997.

Class Shares Outstanding
- -------------------------- -------------------------
$.01 Par Value 13,445,703

CROSS-CONTINENT AUTO RETAILERS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS - EXCEPT PER SHARE DATA)
(UNAUDITED)

Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
-------- ------- -------- --------
Revenues
Vehicle sales $118,078 $66,987 $315,043 $192,888
Other operating revenue 16,706 9,595 44,150 24,936
-------- ------- -------- --------
Total Revenues 134,784 76,582 359,193 217,824

Cost of sales 111,061 64,528 296,756 184,449
-------- ------- -------- --------
Gross Profit 23,723 12,054 62,437 33,375
-------- ------- -------- --------
Operating Expenses
Selling, general and administrative 16,786 8,315 45,429 24,010
Depreciation and amortization 815 272 1,814 821
Employee stock compensation - - - 1,099
Loss from sale of dealerships - - 347 -
-------- ------- -------- --------
17,601 8,587 47,590 25,930
-------- ------- -------- --------
Operating income 6,122 3,467 14,847 7,445

Other income (expense)
Interest income 159 197 992 724
Interest expense (2,112) (1,068) (5,058) (3,318)
-------- ------- -------- --------
Income before income taxes 4,169 2,596 10,781 4,851
Income tax provision 1,557 961 4,157 2,186
-------- ------- -------- --------
Net Income $ 2,612 $ 1,635 $ 6,624 $ 2,665
-------- ------- -------- --------
-------- ------- -------- --------
Net income per average common share $ .19 $ .48
-------- --------
-------- --------
Weighted average common shares
outstanding 13,446 13,764
-------- --------
-------- --------

The accompanying notes are an integral part of these financial statements.

CROSS-CONTINENT AUTO RETAILERS, INC.

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

ASSETS

SEPTEMBER 30, 1997 DECEMBER 31,1996
------------------ ----------------
(UNAUDITED)

Current assets
Cash and cash equivalents $ 2,152 $ 36,946
Accounts receivable 19,626 18,629
Inventories 56,718 48,168
-------- --------
Total current assets 78,496 103,743
Property and equipment, at cost, less
accumulated depreciation 27,390 13,391
Goodwill, net 68,676 22,094
Other assets and deferred charges 5,626 3,218
-------- --------
Total assets $180,188 $142,446
-------- --------
-------- --------

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
Floor plan notes payable $ 53,135 $ 46,282
Current maturities of long-term debt 724 1,345
Accounts payable 7,087 8,623
Due to affiliates - 5,478
Accrued expenses and other liabilities 13,189 7,408
Deferred income taxes 2,397 1,914
-------- --------
Total current liabilities 76,532 71,050

Long-term debt 38,945 10,568
Deferred warranty revenue and other liabilities 1,595 2,310
-------- --------
Total long-term liabilities 40,540 12,878

Stockholders' equity
Preferred stock, $.01 par value, 10,000,000
shares authorized, none issued - -
Common stock, $.01 par value, 100,000,000 shares
authorized, 13,445,703 and 13,800,000
respectively, outstanding 142 138
Paid-in capital 54,471 47,761
Treasury stock (8,740) -
Retained earnings 17,243 10,619
-------- --------
Total stockholders' equity 63,116 58,518
-------- --------

Commitments and contingencies

Total liabilities and stockholders'
equity $180,188 $142,446
-------- --------
-------- --------

The accompanying notes are an integral part of these financial statements.

CROSS-CONTINENT AUTO RETAILERS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1997 1996
-------- -------
Cash flows from operating activities
Net income $ 6,624 $ 2,665
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 1,814 821
Employee stock compensation - 1,099
Deferred taxes and other (748) -
(Increase)decrease in
Accounts receivable 4,178 (1,375)
Inventory 3,812 3,906
Other assets (2,135) (394)
Increase (decrease) in
Accounts payable - trade (4,067) (864)
Accrued expenses and other liabilities (524) 343
-------- -------
Net cash provided by operating activities 8,954 6,201
-------- -------

Cash flows from investing activities
Acquisition of property and equipment (1,504) (254)
Construction in progress (4,935) (570)
Acquisition of dealerships (41,620) -
-------- -------
Net cash used in investing activities (48,059) (824)
-------- -------

Cash flows from financing activities
Change in floor plan notes payable (903) (3,558)
Due to affiliates (7,121) (1,208)
Proceeds from borrowing on long-term debt 30,037 -
Long-term debt repayments (17,702) (1,309)
Proceeds from common stock issuance - 45,818
-------- -------
Net cash provided by financing activities 4,311 39,743
-------- -------

Increase (decrease) in cash and cash equivalents (34,794) 45,120
Cash and cash equivalents at beginning of period 36,946 8,362
-------- -------

Cash and cash equivalents at end of period $ 2,152 $53,482
-------- -------
-------- -------

The accompanying notes are an integral part of these financial statements.

CROSS-CONTINENT AUTO RETAILERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1997

NOTE 1. UNAUDITED INTERIM FINANCIAL INFORMATION

The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the instructions to Form 10-Q and do
not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three and nine months ended September 30, 1997 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1997. This interim report should be read in conjunction
with the consolidated financial statements and notes related thereto, and
management's discussion and analysis of results of operations and financial
condition included in Cross-Continent Auto Retailers, Inc.'s ("C-CAR" or the
"Company") Annual Report on Form 10-K for the year ended December 31, 1996.
The accompanying, unaudited, condensed consolidated financial statements have
been subject to review by the Company's independent accountants, whose report
is included herein.

NOTE 2. INITIAL PUBLIC OFFERING

In September 1996, the Company sold 3,675,000 shares of its common stock
(the "Common Stock") in an initial public offering for $14.00 per share (the
"Offering"). Net proceeds from the Offering, after considering underwriting
commissions, printing costs, professional fees, and other direct expenses,
were $45.5 million.

NOTE 3. NET INCOME PER COMMON SHARE

Earnings per share data are not presented for the three or nine month
periods ended September 30, 1996 because the historical capital structure
prior to the Company's Offering is not comparable to the capital structure
existing after the Offering.

In February 1997, the Financial Accounting Standards Board ("FASB")
issued Financial Accounting Standard No. 128, Earnings Per Share ("FAS 128"),
which is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods. Effective December 31, 1997,
the Company will adopt FAS 128, which establishes standards for computing and
presenting earnings per share ("EPS"). The statement requires dual
presentation of basic and diluted EPS on the face of the income statement for
entities with complex capital structures and requires a reconciliation of the
numerator and denominator of the basic EPS computation, to the numerator and
denominator of the diluted EPS computation. Basic EPS excludes the effect of
potentially dilutive securities while diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common
stock were exercised, converted, or resulted in the issuance of common stock
that would then share in the earnings of the entity.

Pro-forma basic and diluted EPS as computed pursuant to FAS 128 would
not have differed from the reported $0.19 and $0.48 per common share as

presented on the face of the consolidated statement of operations, for the
three and nine month periods ended September 30, 1997, respectively.

NOTE 4. RELATED PARTY TRANSACTIONS

In connection with its business travel, the Company from time to time
makes use of an airplane that is owned and operated by Plains Air, Inc.
Plains Air, Inc. is owned by Bill A. Gilliland and Robert W. Hall, Chairman
and Senior Vice Chairman, respectively. Currently, the Company pays Plains
Air, Inc. $13,050 per month plus a fee of approximately $488 per hour for use
of the airplane. During the three and nine month periods ended September 30,
1997 the Company paid Plains Air, Inc. an aggregate of $130,000 and $399,000,
respectively, for the use of the airplane, compared to $48,000 and $112,000
for the three and nine month periods ended September 30, 1996.

In general, the Company is required to pay for all vehicles purchased
from the automakers upon delivery of the vehicles to the Company. General
Motors Acceptance Corporation ("GMAC"), Chrysler Financial Credit ("CFC") and
Toyota Motor Credit Corporation ("TMCC") provide financing for all new
vehicles and certain qualified used vehicles. This type of financing is
known as "floor plan financing" or "flooring." Under this arrangement with
GMAC, CFC and TMCC, the Company may deposit funds with the financial
institutions in an amount up to 75% of the amount of the floor plan
financing. Such funds earn interest at the same rate charged by GMAC, CFC
and TMCC to the Company for its flooring. From time to time, the control
group and other affiliates have advanced funds to the Company primarily for
the purpose of investing with GMAC, CFC and TMCC. The Company acts only as
an intermediary in this process. As of July 1, 1997, the Company had
withdrawn and repaid all control group and affiliate funds and interest
earned. The amount of interest accrued pursuant to these arrangements during
the nine month period ended September 30, 1997 approximated $193,000,
compared to $85,000 and $276,000 for the three and nine month periods ended
September 30, 1996.

Gilliland Group Family Partnership ("GGFP") was the contracting agent
for the construction of certain facilities for the Company during the nine
month period ending September 30, 1997. Bill Gilliland and Robert W. Hall,
Chairman and Senior Vice Chairman, respectively, are General Partners of
GGFP. The total cost of the facilities through September 30, 1997
approximated $585,000 including approximately $75,000 as payment to GGFP for
architectural and construction management fees. No construction costs or
related management fees were incurred during the three month period ending
September 30, 1997.

GGFP was also the lessor of certain properties to the Company during the
nine month period ending September 30, 1997. The total lease payments
approximated $21,000 and $53,000 for the three and nine month periods ending
September 30, 1997, compared to $16,000 and $40,000 for the comparable
periods ending September 30, 1996.

Subsequent to the acquisition of Toyota West Sales & Service, Inc. and
Douglas Toyota, Inc. (see Note 5), the seller, R. Douglas Spedding became
Vice President-Regional Manager of the Company. In connection with the
acquisition of Toyota West Sales & Service, Inc. and Douglas Toyota, Inc.,
the Company purchased two plots of land from R. Douglas Spedding in exchange
for a total of $7.5 million in seller-financed notes. The plots of land

will be used to relocate the Las Vegas, Nevada and Denver, Colorado
dealerships to newly constructed facilities. In connection with interim
financing on construction projects at the two new locations (see Note 8), the
Company entered into an Interim Construction and Master Loan Agreement ("Loan
Agreement") with R. Douglas Spedding. The Loan Agreement provides interim
financing up to $7.4 million for use on construction of new automobile
dealership facilities in Las Vegas, Nevada and Denver, Colorado.

NOTE 5. ACQUISITIONS

Effective July 1, 1997, the Company acquired Sahara Nissan, Inc.
("Nissan West"). Nissan West is engaged in the retail sales of new and used
vehicles and in the retail and wholesale sales of replacement parts and
vehicle servicing. The total purchase price of approximately $13.7 million
was funded with $11.1 million in cash, $9 million of which was financed with
borrowings on the Company's Credit Facility (hereinafter defined), 125,983
shares of the Company's common stock valued at $15.875 per share, and
$600,000 in seller financed notes, bearing a 6.45% rate of interest and
payable on July 1, 2002. The Nissan West acquisition has been accounted for
as a purchase and the operating results of Nissan West have been included in
the accompanying consolidated statements of operations since July 1, 1997.
The cost of the Nissan West acquisition, including acquisition costs, has
been allocated on the basis of the estimated fair market value of the assets
acquired and the liabilities assumed.

A summary of the preliminary purchase price allocation for Nissan West
is presented below (in thousands):

Net working capital $ 364
Property and equipment 476
Goodwill and other intangibles 12,900
-------
Total $13,740
-------
-------

Effective April 1, 1997, the Company acquired Toyota West Sales and
Service, Inc. and Douglas Toyota, Inc. (collectively "Spedding Toyota").
Spedding Toyota is engaged in the retail sales of new and used vehicles and
in the retail and wholesale sales of replacement parts and vehicle servicing.
The total purchase price of approximately $40.5 million was funded with
$28.5 million in cash, $6 million of which was financed with bank debt
maturing in 2000, 279,720 shares of the Company's common stock valued at
$17.875 per share, and a prime rate based, seller financed note in the amount
of $7 million which matures in 2002. These debt balances have subsequently
been refinanced (See Note 7). In conjunction with the acquisition of
Spedding Toyota, the Company purchased two plots of land from R. Douglas
Spedding (see Note 4) in exchange for a total of $7.5 million in
seller-financed notes. The principal amount, together with interest at the
prime rate, matures October, 1998. The plots of land will be used to
relocate both the Spedding dealerships to newly constructed facilities. The
Spedding Toyota acquisition has been accounted for as a purchase and the
operating results of Spedding Toyota have been included in the accompanying
consolidated statements of operations since April 1, 1997. The cost of the
Spedding Toyota acquisition, including acquisition costs, has been allocated
on the basis of the estimated fair market value of the assets acquired and
the liabilities assumed.

A summary of the purchase price allocation for Spedding Toyota is
presented below (in thousands):

Net working capital $ 2,183
Property and equipment 1,264
Goodwill and other intangibles 37,100
-------
Total $40,547
-------
-------

Effective October 1, 1996, the Company acquired Lynn Hickey Dodge
("Hickey"). Hickey is engaged in the retail sales of new and used
automobiles and in the retail and wholesale sales of replacement parts and
vehicle servicing. The total purchase price of approximately $20 million was
financed with proceeds from the Company's initial public offering. The
acquisition has been accounted for as a purchase, and the operating results
of Hickey have been included in the accompanying consolidated statements of
operations since the date of the acquisition. The cost of the acquisition
was allocated on the basis of the estimated fair market value of the assets
acquired and the liabilities assumed.

A summary of the purchase price allocation for Hickey is presented below
(in thousands):

Net working capital $ 4,760
Property and equipment 430
Goodwill and other intangible assets 14,862
-------
Total $20,052
-------
-------

The unaudited consolidated statement of operations data is presented
below on a pro forma basis as though the Company's 1996 reorganization and
Offering, and the Hickey, Spedding Toyota and Nissan West acquisitions had
all occurred as of the beginning of each period presented (in thousands,
except per share data).
NINE MONTHS ENDED SEPTEMBER 30,
1997 1996
---- ----

Pro forma revenue $436,272 $520,345
Pro forma net income 7,140 8,384
Pro forma net income per share $ 0.51 $ 0.59
Pro forma weighted average shares 13,910 14,206

The adjustments to arrive at pro forma revenue include the historic
revenue of Hickey, Spedding Toyota, and Nissan West prior to the acquisition
of each. Adjustments to net income to arrive at pro forma net income include
estimated additional administrative expenses as a publicly owned company,
additional amortization expense related to purchased goodwill and other
intangibles, increased interest expense associated with the debt incurred in
the purchase of Spedding Toyota and Nissan West, and the tax effects of these
adjustments.

The pro forma results of operations information is not necessarily
indicative of the operating results that would have occurred had the
reorganization, acquisitions and the Offering been consummated as of the
beginning of each period, nor is it necessarily indicative of future
operating results.

NOTE 6. DISPOSITION

Effective July 1, 1997, the Company sold 100% of the stock in
Performance Dodge, Inc. and Performance Nissan, Inc. ("Performance"), both in
the Oklahoma City area, to Benji Investments, Ltd., a Texas limited
partnership controlled by Emmett M. Rice, Jr., the Company's former Chief
Operating Officer (also a shareholder and former Director of the Company), in
exchange for 760,000 shares of the Company's stock valued at a total of $8.7
million based on the average closing share price on the four (4) days
following June 16, 1997 (the date of execution of the definitive agreement).

During the quarter ended June 30, 1997, the Company recorded an estimated
loss on the disposition of $347,000, which included estimated selling
expenses. In conjunction with the sale, the Company repaid $4.3 million in
long-term debt associated with the acquisition of these dealerships. The
Company also retained ownership of the Performance Dodge facilities and the
related mortgage, and is leasing such facilities to Benji Investments, Ltd.
The combined revenue and operating income (loss) from these dealerships for
the three and nine month periods ended September 30, 1997 and 1996 are
presented (in thousands) below:

THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1997 1996 1997 1996
------------------ -----------------
Revenue $ - $17,727 $37,312 $54,924

Operating income (loss) - (11) (215) 959

NOTE 7. REVOLVING CREDIT FACILITY

Effective June 26, 1997, the Company entered into a three year $40
million revolving credit facility ("Credit Facility") with a certain bank,
bearing variable interest rates based generally on the prime rate or the
LIBOR rate plus certain premiums on each depending on the Company's average
leverage ratio. The premium on the prime based rates ranges from 0.5% to
.75% and the premium on the LIBOR based rates ranges from 1.25% to 2%. On
August 7, 1997, the Company elected the LIBOR based rate which on September
30, 1997 was equal to 7.71875%. A commitment fee ranging from .25% to .50%
(0.5% at September 30, 1997), depending on the Company's average leverage
ratio is charged on the unused portion of the facility. As of September 30,
1997, the Company had drawn down $24 million, of which $13 million was used
to refinance borrowings used in the acquisition of Toyota West, Inc. and
Douglas Toyota, Inc., $9 million was used in the acquisition of Nissan West,
and $2 million was used to reduce other debt. The principal balances may be
repaid any time, but are due in full on June 26, 2000. The Credit Facility
requires the Company to maintain certain financial ratios and limits the
Company's capital expenditures for maintenance (excludes acquisitions and
certain store relocations) to $3 million annually. The Company was in
compliance with these requirements at September 30, 1997.

NOTE 8. REAL ESTATE CONSTRUCTION AND RELATED FINANCING

In connection with the new facilities for the Spedding Toyota stores as
discussed in Note 4, the Company has entered into construction contracts with
commitments for approximately $12.9 million. Construction costs to date have
totaled approximately $4.9 million and the projects are expected to be
completed in the second quarter of 1998. In order to finance a portion of
the construction costs, the Company entered into a Loan Agreement with R.
Douglas Spedding on September 30, 1997 (See Note 4). The Loan Agreement
provides interim financing up to $7.4 million for use in the construction of
the new automobile dealership facilities in Las Vegas, Nevada and Denver,
Colorado. Interest accrues at the prime rate plus 1% payable monthly, and any
outstanding balance is payable on October 31, 1998. As of September 30,
1997, no advances had been made under the Loan Agreement.

During the three and nine months ended September 30, 1997, the Company
capitalized approximately $178,000 and $398,000, respectively, in interest
costs relating to the construction of such facilities, including interest
associated with the related land costs.

NOTE 9. CHAISSON ACQUISITION

On October 20, 1997, the Company announced it had reached a definitive
agreement to acquire 100% of the common stock of JRJ Investments, Inc. which
owns Chaisson Motor Cars and Chaisson BMW, a multiple-franchise dealership
group operating in Las Vegas and Henderson, Nevada, for cash, promissory
notes and stock approximating $18.0 million. The transaction will be
accounted for as a purchase, is subject to customary closing conditions,
including appropriate approvals, and is expected to be completed by the end
of the fourth quarter.

NOTE 10. STOCK OPTIONS

The Company modified the pay plans of certain officers and key employees
for the three months ended September 30, 1997 resulting in a reduction in
compensation expense of approximately $1.3 million. As part of the modified
pay plans for the quarter, the Company granted to these officers and
employees options to purchase 492,000 shares of the Company's common stock at
an exercise price of $8.06 per share representing the market price of the
shares on the date of grant. The options are fully vested and were granted
under the Company's 1996 Stock Option Plan. The Company advanced to these
officers and employees an aggregate of approximately $1.1 million which is to
be repaid to the Company by no later than February 1999.

Also during the three months ended September 30, 1997, the Company
granted to certain directors, employees, and officers 339,000 options to
purchase the Company's common shares at an exercise price of $8.06 per share.
Approximately 200,000 of these options vest immediately and the remaining
balance vests over 4 years.

INDEPENDENT ACCOUNTANTS' REVIEW REPORT

The Board of Directors
Cross-Continent Auto Retailers, Inc.

We have reviewed the accompanying condensed consolidated balance sheet of
Cross-Continent Auto Retailers, Inc. and its subsidiaries (the "Company") as
of September 30, 1997, and the condensed consolidated statements of income
for the three and nine month periods ended September 30, 1997 and 1996, and
cash flows for the nine month periods ended September 30, 1997 and 1996.
These financial statements are the responsibility of the Company's management.

We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data, and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that
should be made to the accompanying consolidated financial statements referred
to above for them to be in conformity with generally accepted accounting
principles.

We previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet information of the Company as of
December 31, 1996, and the related consolidated statements of income,
shareholders' equity, and cash flows for the year then ended (not presented
herein) and in our report dated February 13, 1997, we expressed an
unqualified opinion on those consolidated financial statements. In our
opinion, the accompanying consolidated balance sheet information as of
December 31, 1996 is fairly stated, in all material respects, in relation to
the consolidated balance sheet from which it has been derived.

PRICE WATERHOUSE, LLP

Fort Worth, Texas
October 20, 1997

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

GENERAL

Cross-Continent Auto Retailers, Inc. ("C-CAR" or the "Company")
currently owns and operates a group of franchised automobile dealerships in
the Amarillo, Texas, Oklahoma City, Oklahoma, Denver, Colorado and Las Vegas,
Nevada markets. The financial condition and results of operations reported
herein are based solely upon the results of the eight dealerships owned by
C-CAR at September 30, 1997; however, year-to-date and the comparable periods
last year also include Performance Dodge, Inc. and Performance Nissan, Inc.
which were sold effective July 1, 1997. The Company generates its revenues
from sales of new and used vehicles, fees for repair and maintenance
services, sales of replacement parts, and fees and commissions from arranging
financing, extended warranties, and credit insurance in connection with
vehicle sales.

In October 1996, the Company acquired Lynn Hickey Dodge in Oklahoma
City, Oklahoma (See Note 5). In April 1997, the Company completed the
acquisition of Toyota West Sales & Service, Inc., located in Las Vegas,
Nevada, and Douglas Toyota, Inc. located just outside Denver, Colorado, from
owner R. Douglas Spedding (See Note 5). In July 1997, the Company acquired
Nissan West in Las Vegas, Nevada (See Note 5). Hickey, Spedding Toyota and
Nissan West are herein collectively referred to as the "Acquisitions". All
of the aforementioned Acquisitions were accounted for as purchases and,
accordingly, the operating results of the acquired dealerships have been
included in the operating results of the Company since their respective dates
of acquisition. Because of the significant growth of the Company since its
formation, as a result of the aforementioned Acquisitions, the Company's
historical results of operations, its period-to-period comparisons of such
results and certain financial data may not be comparable, meaningful or
indicative of future results.

The Company completed the divestiture of Performance Nissan, Inc. and
Performance Dodge, Inc. in Oklahoma City to Benji Investments, Ltd., a Texas
limited partnership controlled by Emmett M. Rice, Jr., a former officer and
director of the Company (See Note 6). The divestiture was effective July 1,
1997.

In October, 1997, the Company announced the proposed acquisition of 100%
of the stock of JRJ Investments, Inc., which owns Chaisson Motor Cars and
Chaisson BMW located in Las Vegas and Henderson, Nevada, for $18.0 million,
payable in cash, promissory notes and stock. The transaction will be
accounted for as a purchase, is subject to customary closing conditions,
including appropriate manufacturer approvals, and is expected to be completed
by the end of the fourth quarter (See Note 9).

FACTORS THAT MAY AFFECT FUTURE RESULTS

Certain matters discussed herein are forward-looking statements about the
business, financial condition and prospects of the Company. The actual results
could differ materially from those indicated by such forward-looking statements
because of various risks and uncertainties. Such risks and uncertainties may
include, but are not limited to, local, regional and national economic
conditions, changes in consumer demand for products offered by the Company, auto
manufacturer employee strikes and other matters that may adversely affect the
availability of products and pricing, state and federal regulatory environment,
availability of additional funding for acquisitions in the future, and other
risks indicated in the Company's previous filings with the Commission. The

Company cannot control these risks and uncertainties and, in many cases,
cannot predict the risks and uncertainties that could cause its actual
results to differ materially from those indicated by the forward-looking
statements.

CROSS-CONTINENT AUTO RETAILERS, INC.

CONSOLIDATED MARGIN STATISTICS
SEPTEMBER 30, 1997

QTR ENDED QTR ENDED YTD YTD
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996 SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
------------------ ------------------ ------------------ ------------------
(IN THOUSANDS, EXCEPT UNITS AND PERCENTAGES)

New Vehicle Sales
Units 2,891 1,514 7,393 4,644
Revenue $ 65,260 $32,610 $163,550 $ 98,752
Average Selling Price $ 22.6 $ 21.5 $ 22.1 $ 21.3

Used Vehicle Sales
Units 3,552 1,781 10,128 5,022
Revenue $ 42,257 $24,433 $120,702 $ 66,497
Average Selling Price $ 11.9 $ 13.7 $ 11.9 $ 13.2

Wholesale Used Vehicle Sales
Units 2,139 1,739 6,503 5,229
Revenue $ 10,561 $ 9,944 $ 30,791 $ 27,639
Average Selling Price $ 4.9 $ 5.7 $ 4.7 $ 5.3

Total Vehicle Sales
Units 8,582 5,034 24,024 14,895
Revenue $118,078 $66,987 $315,043 $192,888

Other Operating Revenue
Finance and Insurance $ 5,231 $ 3,334 $ 13,975 $ 7,675
Parts and Service 10,242 6,121 26,879 16,577
Other Revenue 1,233 140 3,296 684
-------- ------- -------- --------
Total Other
Operating Revenue 16,706 9,595 44,150 24,936
-------- ------- -------- --------

Total Revenue $134,784 $76,582 $359,193 $217,824
-------- ------- -------- --------
-------- ------- -------- --------

Gross Profit
New Vehicles $ 6,523 $ 3,143 $ 17,288 $ 10,638
Used Vehicles 6,309 2,790 16,669 8,461
Wholesale Used Vehicles (427) 124 (1,294) (415)
Finance and Insurance 4,772 2,918 12,592 5,779
Parts and Service 5,313 2,939 13,886 8,228
Other Revenue 1,233 140 3,296 684
-------- ------- -------- --------

Total Gross Profit $ 23,723 $12,054 $ 62,437 $ 33,375
-------- ------- -------- --------
-------- ------- -------- --------

Gross Profit Percentages
New Vehicles 10.0% 9.6% 10.6% 10.8%
Used Vehicles 14.9% 11.4% 13.8% 12.7%
Wholesale Used Vehicles (4.0%) 1.2% (4.2%) (1.5%)
Finance and Insurance 91.2% 87.5% 90.1% 75.3%
Parts and Service 51.9% 48.0% 51.7% 49.6%
Other Revenue 100.0% 100.0% 100.0% 100.0%
-------- ------- -------- --------

Total Gross Profit Margin 17.6% 15.7% 17.4% 15.3%
-------- ------- -------- --------
-------- ------- -------- --------

The accompanying notes are an integral part of these financial statements.

CROSS-CONTINENT AUTO RETAILERS, INC.

(1) SAME STORE MARGIN STATISTICS
SEPTEMBER 30, 1997

Qtr Ended Qtr Ended YTD YTD
September 30, 1997 September 30, 1996 September 30, 1997 September 30, 1996
------------------ ------------------ ------------------ ------------------
(IN THOUSANDS, EXCEPT UNITS AND PERCENTAGES)

New Vehicle Sales
Units 1,172 1,130 3,154 3,278
Revenue $ 27,287 $ 25,196 $ 72,445 $ 73,305
Average Selling Price $ 23.3 $ 22.3 $ 23.0 $ 22.4

Used Vehicle Sales
Units 1,205 1,302 3,527 3,656
Revenue $ 16,256 $ 18,822 $ 47,232 $ 50,475
Average Selling Price $ 13.5 $ 14.5 $ 13.4 $ 13.8

Wholesale Used Vehicle Sales
Units 1,219 1,347 3,550 3,970
Revenue $ 7,392 $ 8,062 $ 20,343 $ 22,308
Average Selling Price $ 6.1 $ 6.0 $ 5.7 $ 5.6

Total Vehicle Sales
Units 3,596 3,779 10,231 10,904
Revenue $ 50,935 $ 52,080 $140,020 $146,088

Other Operating Revenue
Finance and Insurance $ 2,227 $ 2,532 $ 6,361 $ 5,508
Parts and Service 4,479 4,126 11,654 10,924
Other Revenue 242 118 918 380
-------- -------- --------- --------
Total Other
Operating Revenue 6,948 6,776 18,933 16,812
-------- -------- --------- --------
Total Revenue $ 57,883 $ 58,856 $158,953 $162,900
-------- -------- --------- --------
-------- -------- --------- --------
Gross Profit
New Vehicles $ 2,538 $ 2,611 $ 7,790 $ 7,834
Used Vehicles 1,981 2,251 5,982 6,476
Wholesale Used Vehicles (188) 80 (428) (328)
Finance and Insurance 1,892 2,195 5,448 4,161
Parts and Service 2,202 2,084 5,951 5,721
Other Revenue 242 118 918 380
-------- -------- --------- --------
Total Gross Profit $ 8,667 $ 9,339 $ 25,661 $ 24,244
-------- -------- --------- --------
-------- -------- --------- --------

Gross Profit Percentages
New Vehicles 9.3% 10.4% 10.8% 10.7%
Used Vehicles 12.2% 12.0% 12.7% 12.8%
Wholesale Used Vehicles (2.5%) 1.0% (2.1%) (1.5%)
Finance and Insurance 85.0% 86.7% 85.6% 75.5%
Parts and Service 49.2% 50.5% 51.1% 52.4%
Other Revenue 100.0% 100.0% 100.0% 100.0%
-------- -------- --------- --------

Total Gross Profit Margin 15.0% 15.9% 16.1% 14.9%
-------- -------- --------- --------
-------- -------- --------- --------

(1) "SAME STORE" INFORMATION RELATES TO THE DEALERSHIPS FOR WHICH THEIR RESULTS
OF OPERATIONS ARE INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE
SAME PERIODS OF 1997 AND 1996.

The accompanying notes are an integral part of these financial statements.

RESULTS OF OPERATIONS FOR THE
THREE MONTHS ENDED SEPTEMBER 30, 1997

Total revenue increased 76.0% to $134.8 million for the quarter ended
September 30, 1997 compared to $76.6 million for the quarter ended September 30,
1996.

New vehicle sales revenue increased approximately 100.1% to $65.3 million
for the third quarter of 1997, compared to $32.6 million in the third quarter of
1996. Acquisitions accounted for $38.0 million of the increase, which was
partially off-set by the absence of revenue from the two Performance dealerships
which were sold in July, 1997 but included in the comparable period last year.
Same store sales increased 8.3% or $2.1 million. New unit sales increased 1,377
units in the quarter to 2,891 units, compared to 1,514 in the third quarter of
1996. The Acquisitions accounted for 1,719 units of the increase, which was
partially off-set by the absence of unit sales from the Performance dealerships.
Comparable store new vehicle sales increased 42 units. The average selling price
of a new vehicle was $22,574, a 4.8% increase.

Gross margins on new vehicle sales were 10.0%, an increase of .4 percentage
point over last year. Acquisitions added approximately $4.0 million in gross
profit and the Acquisitions have historically had higher margins on new vehicle
sales.

Used vehicle retail sales revenue increased approximately 73.0% in the
third quarter of 1997 to $42.3 million, compared to $24.4 million in the third
quarter of 1996. Acquisitions added approximately $26.0 million, which was
partially off-set by the exclusion of the Performance dealerships. Same store
sales decreased approximately 13.6% or $2.6 million. The same store decrease in
used retail sales was attributable to lower used retail unit sales largely
because of manufacturer incentives at the end of the model year increased the
attraction of new vehicles relative to used vehicles, and to lower average
selling prices. Same store retail used unit sales decreased 7.5% to 1,205 for
the quarter and average selling prices decreased 6.7% per unit to $13,491.

Overall, the average used car selling prices decreased by 13.3% to $11,897.
Acquisitions have historically had a lower used car average selling price, when
combined with the Company's same store used vehicle sales, resulted in an
overall lower average selling price.

Used vehicle retail gross profit margin was 14.9%, compared to 11.4% in the
third quarter of 1996. The increase was primarily attributable to the higher
gross margins at the Acquisitions, which added approximately $4.3 million in
gross profit and the Acquisitions have historically had higher margins on used
vehicle sales. The increase from Acquisitions was partially off-set by the
exclusion of the Performance dealerships and a reduction of $270,000 in same
store gross profit.

The Company's other operating revenue increased 74.1% to $16.7 million for
the quarter compared to $9.6 million in the comparable period last year,
primarily because of increased finance and insurance revenue and parts and
service revenue.

Finance and insurance revenue increased 56.9% to $5.2 million for the
quarter. Acquisitions added $3.0 million, which was partially off-set by the
exclusion of the Performance dealerships and a reduction in same store sales of
$305,000. The decrease in same store sales was attributable to the decrease in
used retail vehicles sold during the quarter.

Gross profit margin on finance and insurance was 91.2% which represents an
increase of 3.7 percentage points over last year. Acquisitions account for the
majority of the increase, which was partially off-set by the exclusion of the
Performance dealerships and a reduction of $304,000 in same store gross profit.

Parts and service revenue increased 67.3% to $10.2 million, largely because
of the inclusion of the Acquisitions which added approximately $5.8 million.
The Acquisitions increase was off-set by the exclusion of the Performance
dealerships. Same store sales increased by $353,000 or 8.5% over the same
period last year.

Gross profit margin on parts and service revenue was 51.9% which represents
an increase of 3.9 percentage points over last year. Acquisitions added
approximately $3.1 million in gross profit which was partially off-set by the
divestiture of the Performance dealerships.

The increase in other revenue is primarily attributable to miscellaneous
fee income recorded by the Acquisitions. Fees, which are collected on vehicle
sales, are usually governed by state regulatory agencies. The Acquisitions are
located in states which permit higher fees compared to the Company's same store
dealerships. The Company expects this component of other operating revenue to
increase as the Company acquires additional dealerships.

Total Company gross profit increased 96.8% for the quarter to $23.7
million, compared to $12.1 million for 1996. Acquisitions accounted for $15.1
million of the increase, which was off-set by the exclusion of the Performance
dealerships and a decrease in same store gross profit of $672,000, or 7.2%. The
decrease in same store gross profit was primarily attributable to a reduction in
used retail unit sales, increased losses on wholesale used unit sales and a
reduction in finance and insurance gross profit, which was partially off-set by
an increase in gross profit from parts and service and other operating revenue.

Total Company gross profit as a percentage of sales was 17.6% for the
quarter compared to 15.7% for the third quarter of 1996. The increase in gross
profit as a percentage of sales is primarily attributable to higher gross
margins on other operating revenue (including finance and insurance, and parts
and service) and higher used vehicle margins from the Acquisitions, partially
off-set by decreased gross margin on same store sales which was primarily
attributable to a decline in new vehicle margins, wholesale used vehicle margins
and finance and insurance margins.

The Company anticipates a reduction in overall gross profit as a percentage
of revenue for the remainder of 1997. The Company believes margins may decline
if the trend of lower demand for vehicles continues.

Also, lower vehicle sales would directly affect finance and insurance
revenue, which is one of the Company's highest gross margin revenue item.

Additionally, the amount of revenue recognized related to the in-house
warranties sold in prior periods, which was deferred and amortized over the
contractual service period of the warranty contracts, will decline each quarter
and will eventually cease at the expiration of the warranty periods. As a
result, gross margin will be negatively impacted during future periods.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

The Company's selling, general and administrative expenses were $16.8
million, or 12.5% of the Company's revenues, for the quarter ended September 30,
1997, compared to $8.3 million, or 10.9% of total revenues, for the quarter
ended September 30, 1996. The increase was primarily attributable to the
Acquisitions which accounted for $11.1 million of the increase. The
Acquisitions have historically had a higher percentage of expense to revenue
ratio attributable to higher commission expenses in comparison to same store
dealerships.

The Company also incurred increased expenses related to higher corporate
expenses associated with public company administration and the assimilation of
Acquisitions. The increase was partially off-set by a decrease in staff at one
of the Company's recently acquired dealerships and the elimination of certain
non-essential contracts and leases. In addition, officers' pay plans were
modified for the quarter resulting in a reduction of compensation expense of
approximately $495,000. Employee pay plans were also modified resulting in an
additional reduction of expenses for the quarter of $828,000. Options to
purchase 492,000 shares of the Company's common stock were issued to these
officers and employees during the quarter at an exercise price of $8.06 per
share which approximated the market price at the date of grant. These options
are fully vested (See Note 10).

The Company expects that it may lose expense leverage during the next two
quarters because the fourth and first quarters are seasonally slower selling
quarters. Additionally, as the Company continues to acquire additional
dealerships, the Company's assimilation expenses are expected to continue to
rise.

INTEREST EXPENSE

The Company's interest expense, net of interest income, increased
approximately 124.3% to $2.0 million for the quarter ended September 30, 1997
compared to $871,000 for the quarter ended September 30, 1996.

Net interest expense is expected to increase throughout 1997 and into 1998
as the Company uses debt to acquire additional dealerships. Additionally,
interest expense on floorplan debt will increase as the Company acquires
additional dealerships.

INCOME TAXES

The Company's effective tax rate for the quarter ended September 30, 1997
approximated 37.4%. The tax rate for the same quarter of 1996 was 37.0%.
Management expects the effective tax rate in 1997 to approximate 37.4% to 38.0%.

RESULTS OF OPERATIONS FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1997

Total revenue increased approximately 64.9% to $359.2 million for the
period ended September 30, 1997, compared with total revenue of $217.8 million
last year.

New vehicle sales revenue increased approximately 65.6% to $163.6 million,
compared with $98.8 million in 1996. The increase in new vehicle sales for the
period was primarily attributable to Acquisitions which added $77.1 million.
This increase was partially off-set by the absence of revenue from the two
Performance dealerships which were sold in July, 1997. Same store sales
decreased by $860,000 over the comparable period a year ago, largely because of
weak market conditions in the Company's Amarillo trade area.

New unit sales increased 2,749 units for the nine month period to 7,393
units compared to 4,644 units for the same nine month period in 1996.
Acquisitions accounted for 3,483 units of the increase and was partially off-set
by the absence of units from the two Performance dealerships which were sold in
July, 1997, and a 124 unit decrease in same store new unit sales. The Company
attributes the lower demand for new vehicles to trends consistent within the
automotive retail industry. The average selling price of a new vehicle was
$22,122, a 4.0% increase.

New vehicle gross margins were 10.6%, a decrease of .20 percentage points,
largely attributable to lower margins at the Performance dealerships.
Acquisitions added approximately $8.0 million in gross profit and have
historically had higher margins.

Used vehicle retail sales revenue increased approximately 81.5% to $120.7
million, compared to $66.5 million in 1996. Acquisitions accounted for $59.2
million of the increase in used vehicle retail sales. Used vehicle retail sales
revenue from Acquisitions was partially off-set by the exclusion of the
Performance dealerships in the third quarter of 1997. Same store sales
decreased $3.2 million or 6.4%, largely because same store unit sales decreased
129 units. Consistent with trends in the quarter, lower average selling prices
at the Acquisitions reduced the retail used vehicle average selling price to
$11,918, compared to $13,241 last year. For the remainder of 1997 the Company
will continue to place an increased emphasis on used vehicle retail sales
because of customer buying patterns and the higher gross margins associated with
used vehicle sales.

Gross margins on used retail sales were 13.8%, an increase of 1.1
percentage points in comparison with last year. The increase was primarily
attributable to the higher gross margins at the Acquisitions. The Acquisitions
added approximately $9.5 million in gross profit and have historically had
higher margins. The increase from Acquisitions was partially off-set by the
exclusion of the Performance dealerships during the third quarter and a
reduction of $494,000 in same store gross profit.

For the nine months ended September 30, 1997 other operating revenue
increased 77.1% to $44.2 million, compared to $24.9 million during the

comparable period last year, primarily because of increased finance and
insurance revenue and parts and service revenue.

Finance and insurance revenue increased 82.1% to $14.0 million, largely
attributable to the Acquisitions. Acquisitions added $6.2 million and same
store sales increased approximately $853,000, which were partially off-set by
the exclusion of the Performance dealerships. The same store sales increase can
be largely attributed to third party extended warranty sales; the commissions
from the sale of third party warranties are recognized immediately into income
as opposed to in-house warranty revenue which is amortized ratably into income
over the life of the contracts. The Company commenced the sale of third party
warranties in 1996.

Gross profit margin on finance and insurance was 90.1% which represents an
increase of 14.8 percentage points over last year. The Acquisitions accounted
for a majority of the increase. Same store gross profit margin increased by
10.1 percentage points, largely attributable to third party extended warranty
sales.

Parts and service revenue increased 62.1% to $26.9 million, largely because
of the Acquisitions, which added approximately $11.3 million. The same store
parts and service sales increased by $730,000 over the same period last year.

Gross profit margin on parts and service revenue was 51.7% which represents
an increase of 2.1 percentage points over the comparable period last year.
Acquisitions added approximately $6.3 million in gross profit, which was
partially off-set by the divestiture of the Performance dealerships in July,
1997. The increase in margin was largely attributable to lower wholesale parts
sales, which typically generate lower gross profit margins.

The increase in other revenue was primarily attributable to miscellaneous
fee income recorded at the Acquisitions. Fees, which are collected on vehicle
sales, are usually governed by state regulatory agencies. The Acquisitions are
located in states which permit higher fees compared to the Company's same store
dealerships. The Company also experienced an increase in same store sales of
$538,000. The Company expects this component of other operating revenue to
increase as the Company acquires additional dealerships.

Total Company gross profit increased 87.1% to $62.4 million for the nine
month period of 1997, compared to $33.4 million for the 1996 period. The
Acquisitions accounted for $31.3 million of the increase, partially off-set by
the exclusion of the Performance dealerships in the third quarter of 1997. Same
store gross profit increased by $1.4 million, which was primarily attributable
to increased gross profit on finance and insurance revenue, parts and service
revenue, and other revenue.

Total Company gross profit as a percentage of sales was 17.4% for the
period, compared to 15.3% for the comparable period in 1996. The increase in
gross profit as a percentage of sales was primarily attributable to higher
margins on other operating revenue (including parts and service, and finance and
insurance) and stronger used vehicle margins from the Acquisitions. The
increase added by the Acquisitions was partially off-set by the effect of the
Performance dealerships which were sold in July of 1997.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses for the nine months ended
September 30, 1997 were $45.4 million, or 12.6% of the Company's revenues,
compared to $24.0 million, or 11.0% of the Company's revenues, for the nine
months ended September 30, 1996. The Acquisitions accounted for $22.9 million
of the increase in expenses for the nine month period. The Acquisitions have
historically had a higher expense to revenue ratio attributable to higher
commission expense in comparison to same store dealerships. Expenses as a
percentage of revenue increased for the nine month period largely because of
higher dealership assimilation and corporate overhead costs. The Company
expects that it may lose expense leverage during the next two quarters because
the fourth and first quarters are seasonally slower quarters.

INTEREST EXPENSE

Net interest expense for the nine months ended September 30, 1997 increased
56.8% to $4.1 million compared to $2.6 million for the nine months ended
September 30, 1996. The Acquisitions accounted for approximately $1.5 million
of the increase in interest expense. The increase is primarily attributable to
an increase in borrowings to finance the Acquisitions and increased floorplan
financing. This increase is partially off-set by interest income earned on
proceeds from the Offering. For the nine months ended September 30, 1997 this
income approximated $595,000.

INCOME TAXES

The Company's effective income tax rate for the nine months ended September
30, 1997 approximated 38.6% as compared to 45.1% for the comparable period of
1996. The decrease in the effective rates relates to certain non-deductible
expenses incurred during the first nine months of 1996. The effective tax rate
for the period ended September 30, 1997 was 37.4%. Management expects the
effective tax rate in 1997 to approximate 37.4% to 38.0%.

LIQUIDITY AND CAPITAL RESOURCES

The Company requires cash primarily for financing its inventory of new and
used vehicles and replacement parts, acquisitions of additional dealerships,
capital expenditures and transition expenses in connection with its
acquisitions. Historically, the Company has met these liquidity requirements
primarily through cash flow generated from operating activities, floor plan
financing and borrowings under the Credit Facility and other credit agreements.
Floor plan financing from GMAC currently represents the primary source of
financing for vehicle inventories.

During the first nine months of 1997, the Company generated net cash of
$9.0 million from operating activities, compared to $6.2 million

generated for the nine months ended September 30, 1996. The increase in net
cash provided by operating activities was primarily attributable to a
decrease in accounts receivable and inventory and an increase in net income
which was partially off-set by a decrease in accounts payable and an increase
in other assets. The increase in other assets relates to debt financing
costs and advances made to certain officers and employees.

Cash used in investing activities totaled $48.1 million during the first
nine months of 1997. Expenditures relating to the purchase of Spedding Toyota
and Nissan West totaled approximately $41.6 million. The Company spent $4.9
million as of September 30, 1997, and expects to spend an additional $8.0
million (a total of $20.4 million, including $7.5 million in land financed by
seller and construction costs), to construct two new dealership facilities in
order to relocate Toyota West and Douglas Toyota. Funds will be provided by
cash on hand and interim financing provided by a $7.4 million note from a
certain officer of the Company dated September 30, 1997 (See Note 8). The
Company plans to convert interim financing to permanent financing when
construction is completed in the second quarter of 1998. The Company currently
anticipates that any future acquisitions will be financed with a combination of
debt, stock and cash.

Cash generated from financing activities totaled $4.3 million for the nine
months ended September 30, 1997. The increase was mainly attributable to a
$24.0 million advance under the Credit Facility for debt repayment and the
Nissan West acquisition which was partially off-set by the repayment of
long-term debt in conjunction with the sale of the Performance dealerships, a
decrease in floor plan debt related to decreased inventory levels and a
decrease in due to affiliates.

The Company currently finances its purchases of new vehicle inventory with
GMAC, CFC and TMCC. The Company also maintains lines of credit with GMAC, CFC
and TMCC for the financing of used vehicles. GMAC, CFC and TMCC receive a
security interest in all inventory they finance. The Company makes monthly
interest payments on the amounts financed by GMAC, CFC and TMCC. The Company
must repay the principal amount of indebtedness with respect to any vehicle
generally within two to three days of the sale of such vehicle by the Company.
The Company periodically renegotiates the terms of its financing with GMAC, CFC
and TMCC, including the interest rate. As of September 30, 1997, the Company
had outstanding floor plan debt of $53.1 million and paid an average annual
interest rate of 8.8%.

The Company plans to use the Credit Facility to finance the major portion
of any future acquisitions (See Note 7). The Company is negotiating to increase
the Credit Facility by an additional $35 million, which will bring the total
Credit Facility to $75 million and, is subject to syndication on a best-efforts
basis by the agent bank; however, no assurance can be given as to whether the
line will be increased or whether the agent bank will be able to syndicate
future loan requests. At September 30, 1997 the Company had $16 million
available under this credit agreement. The Company believes that its existing
capital resources will be sufficient to fund its current acquisition
commitments.

The Company believes that its existing capital resources, including cash on
hand, cash from operations, and funds available under the Credit

Facility will be sufficient to run the Company's operations in the ordinary
course and fund its debt service requirements. To the extent the Company
pursues additional acquisitions, it may need to raise additional capital
either through the public or private issuance of equity or debt securities or
through additional bank borrowings.

The Company estimates that it will incur a tax liability of approximately
$4 million in connection with the change in its tax basis of accounting for
inventory from LIFO to FIFO. The Company is required to pay this liability in
six equal annual installments, which commenced in March 1997, and believes that
it will be able to pay such obligation with cash provided by operations.

SEASONALITY

The Company generally experiences a higher volume of new and used vehicle
sales in the second and third quarters of each year. If the Company acquires
dealerships in other markets, it may be affected by other seasonal or consumer
buying trends.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, the Company is named in claims involving the manufacture
of automobiles, contractual disputes and other matters arising in the ordinary
course of the Company's business. Currently, no legal proceedings are pending
against or involve the Company that, in the opinion of management, could be
expected to have a material adverse effect on the business, financial condition
or results of operations of the Company.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBITS

A list of exhibits required by Item 601 of Regulation S-K and
filed as part of this report is set forth in the Exhibit Index,
which immediately precedes such exhibits.

(b) REPORTS ON FORM 8-K

(1) A Form 8-K was filed on April 25, 1997 reporting the
purchase of all the outstanding capital stock of each of
Douglas Toyota, Inc., a Colorado corporation, and Toyota
West Sales & Service, Inc., a Nevada corporation, together
with certain real estate to be used in connection with both
dealerships.

(2) A Form 8-K/A No. 1 was filed on June 24, 1997 completing
Item 7 Financial Statements and Pro Forma Financial
Information.

(3) A Form 8-K was filed on July 15, 1997 reporting the purchase
of all the outstanding stock of Sahara Nissan, Inc., a
Nevada corporation.

(4) A Form 8-K/A No. 1 was filed on August 13, 1997 completing
Item 7 Financial Statements and Pro Forma Financial
Information.

(5) A Form 8-K was filed on September 2, 1997 reporting the sale
of all the outstanding capital stock of Performance Dodge,
Inc., an Oklahoma corporation, and Performance Nissan, Inc.,
an Oklahoma corporation.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

CROSS-CONTINENT AUTO RETAILERS, INC.

DATE: November 12, 1997 By: /s/ JAMES F. PURSER
-----------------------------------
James F. Purser,
Chief Financial Officer

DATE: November 12, 1997 By: /s/ CHARLES D. WINTON
-----------------------------------
Charles D. Winton,
Vice President and
Chief Accounting Officer

EXHIBIT INDEX

EXHIBIT
NUMBER DESCRIPTION
- ------- ---------------------------------------------------

2.1 Asset Purchase Agreement dated as of June 17, 1996, among Lynn Hickey
Dodge, Inc., Lynn Hickey, and Cross Country Dodge, Inc. (1)
2.2 Stock Purchase Agreement, dated as of January 23, 1997, by and between
Cross-Continent Auto Retailers, Inc. and R. Douglas Spedding (2)
2.3 Amendment to Stock Purchase Agreement dated as of April 1, 1997, by
and between Cross-Continent Auto Retailers, Inc. and R. Douglas
Spedding (3)
2.4 Stock Purchase Agreement dated as of February 28, 1997, among Cross-
Continent Auto Retailers, Inc., Jack Biegger, Dale Edwards, and Sahara
Datsun, Inc., d/b/a Jack Biegger Nissan, as amended by the Amendment
to Stock Purchase Agreement dated as of March 17, 1997, among Cross-
Continent Auto Retailers, Inc., Jack Biegger, Dale Edwards, and Sahara
Nissan, Inc., d/b/a Jack Biegger Nissan (10)
2.5 Second Amendment to Stock Purchase Agreement dated as of April 30,
1997, by and between Cross-Continent Auto Retailers, Inc., Jack
Biegger, Dale Edwards, and Sahara Datsun, Inc., d/b/a Jack Biegger
Nissan, as amended by the Amendment to Stock Purchase Agreement dated
as of March 17, 1997, among Cross-Continent Auto Retailers, Inc., Jack
Biegger, Dale Edwards, and Sahara Nissan, Inc., d/b/a Jack Biegger
Nissan (10)
2.7 Purchase Agreement dated as of March 1, 1997, between RDS, Inc. and
Cross-Continent Auto Retailers, Inc. (omitting exhibits thereto, which
will be furnished supplementally to the Commission upon request) (3)
2.8 Purchase Agreement dated as of March 1, 1997, between R. Douglas
Spedding and Cross-Continent Auto Retailers, Inc. (omitting exhibits
thereto, which will be furnished supplementally to the Commission upon
request) (3)
2.9 Third Amendment to Stock Purchase Agreement, dated as of May 9, 1997,
among Cross-Continent Auto Retailers, Inc., The Jack Biegger Revocable
Living Trust, The Dale M. Edwards Revocable Family Trust, and Sahara
Nissan, Inc. d/b/a Jack Biegger Nissan. (9)
2.10 Stock Purchase Agreement dated as of June 20, 1997 between Cross-
Continent Auto Retailers, Inc. and Benji Investments, Ltd. (omitting
exhibits thereto, which will be furnished supplementally to the
Commission upon request). (11)
2.11 Stock Purchase Agreement dated as of October 8, 1997, by and among
Cross-Continent Auto Retailers, Inc., The Chaisson Family Trust R-501,
and JRJ Investments, Inc. (omitting exhibits thereto, which will be
furnished supplementally to the Commission upon request)
2.12 Amendment to Stock Purchase Agreement dated as of October 14, 1997, by
and among Cross-Continent Auto Retailers, Inc., The Chaisson Family
Trust R-501, and JRJ Investments, Inc.

3.1 Amended and Restated Certificate of Incorporation of Cross-Continent
Auto Retailers, Inc. (4)
3.3 Amended and Restated Bylaws of Cross-Continent Auto Retailers, Inc.
(4)
4.1 Specimen Common Stock Certificate (4)
4.2 Rights Agreement between Cross-Continent Auto Retailers, Inc. and The
Bank of New York, as rights agent (4)
4.3 Amended and Restated 1996 Stock Option Plan of Cross-Continent Auto
Retailers, Inc. (5)
4.4 Registration Rights Agreement dated as of April 1, 1997, by and
between Cross-Continent Auto Retailers, Inc. and R. Douglas Spedding
(3)
10.1 Dealer Sales and Service Agreement dated November 1, 1995, between the
Chevrolet Division of General Motors Corporation and Plains Chevrolet,
Inc., as amended by Supplemental Agreement dated as of July 29, 1996
(1)(6)
10.3 Dealer Sales and Service Agreement dated September 23, 1996, between
the Nissan Division of Nissan Motor Corporation, U.S.A., Quality
Nissan, Inc. and Cross-Continent Auto Retailers, Inc. (4)
10.4 Dollar Volume Contract dated April 1, 1997, between Plains Chevrolet,
Inc., Westgate Chevrolet, Inc., Midway Chevrolet, Inc., Quality
Nissan, Inc. and Amarillo Globe News (1)
10.6 Lease Agreement dated March 1, 1994, among John W. Adams, Eleanore A.
Braly as Trustee of the Eleanore A. Braly Trust, Romie G. Carpenter,
Melody Lynn Goff, and Selden Simpson and Quality Nissan, Inc. (1)
10.7 Office Lease dated June 1, 1996, between Gilliland Group Family
Partnership and Cross-Country Auto Retailers, Inc.(now named Cross-
Continent Auto Retailers, Inc.) (1)
10.9 Corporation and Shareholders' Agreement of Xaris Management Co. (1)
10.10 Documents dated December 4, 1995, relating to $5,550,000 loan by
General Motors Acceptance Corporation to Performance Dodge, Inc. (1)
10.10.1 Promissory Note by Performance Dodge, Inc. to General Motors
Acceptance Corporation, in the amount of $1,850,000 (2)
10.10.2 Promissory Note by Performance Dodge, Inc. to General Motors
Acceptance Corporation, in the amount of $3,700,000 (fully repaid)(2)
10.10.4 Security Agreement between General Motors Acceptance Corporation and
Performance Dodge, Inc. (2)
10.10.5 Mortgage, Assignment and Security Agreement between General Motors
Acceptance Corporation and Performance Dodge, Inc. (2)
10.11 Documents relating to loan by General Motors Acceptance Corporation to
Midway Chevrolet, Inc. (1)
10.11.1 Promissory Note dated December 15, 1989, by Midway Chevrolet, Inc. to
General Motors Acceptance Corporation, in the amount of $977,249.74
(2)
10.11.2 Renewal, Extension and Modification Agreement dated February 20, 1995,
between General Motors Acceptance Corporation and Midway Chevrolet,
Inc. (2)
10.11.3 Security Agreement dated February 20, 1995, between General Motors
Acceptance Corporation and Midway Chevrolet, Inc. (2)
10.13 Documents relating to used vehicle inventory financing agreements
between General Motors Acceptance Corporation and

Cross-Continent Auto Retailers, Inc. dealership subsidiaries (1)
10.13.1 Used Vehicle Wholesale Borrowing Base Credit Line Loan Agreement dated
June 7, 1996, between General Motors Acceptance Corporation and Plains
Chevrolet, Inc. (2)(7)
10.13.2 Promissory Note dated June 7, 1996, by Plains Chevrolet, Inc. to
General Motors Acceptance Corporation, in the amount of $3,000,000
(2)(8)
10.13.3 Cross-Default and Cross-Collateralization Agreements between General
Motors Acceptance Corporation and Midway Chevrolet, Inc., Plains
Chevrolet, Inc., Quality Nissan, Inc., and Westgate Chevrolet, Inc.
(2)
10.14(*) Employment Contract dated February 21, 1997, by and between Cross-
Continent Auto Retailers, Inc. and James F. Purser (2)
10.15(*) Employment Contract dated February 18, 1997, by and between Cross-
Continent Auto Retailers, Inc. and R. Wayne Moore
10.16(*) Employment Agreement dated as of April 1, 1997, by and between R.
Douglas Spedding and Cross-Continent Auto Retailers, Inc. (3)
10.17(*) Employment Agreement dated as of April 1, 1997, by and between Douglas
J. Spedding and Cross-Continent Auto Retailers, Inc. (3)
10.18 Promissory Note dated April 1, 1997, by Cross-Continent Auto
Retailers, Inc. to the order of R. Douglas Spedding in the principal
amount of $7,000,000 (fully repaid)(3)
10.19 Promissory Note dated April 4, 1997, by Cross-Continent Auto
Retailers, Inc. to Amarillo National Bank in the principal amount of
$8,000,000 (fully repaid)(3)
10.20 Documents dated April 10, 1997, relating to promissory note by Cross-
Continent Auto Retailers, Inc. to the order of RDS, Inc. in the
principal amount of $2,000,000 (3)
10.20.1 Promissory Note by Cross-Continent Auto Retailers, Inc. to the order
of RDS, Inc. (3)
10.20.2 Security Agreement between Cross-Continent Auto Retailers, Inc. and
RDS, Inc. (3)
10.20.3 Deed of Trust between Cross-Continent Auto Retailers, Inc. and RDS,
Inc. (3)
10.21 Documents dated April 10, 1997, relating to promissory note by Cross-
Continent Auto Retailers, Inc. to the order of R. Douglas Spedding in
the principal amount of $5,500,000 (3)
10.21.1 Promissory Note by Cross-Continent Auto Retailers, Inc. to the order
of R. Douglas Spedding (3)
10.21.2 Security Agreement between Cross-Continent Auto Retailers, Inc. and R.
Douglas Spedding (3)
10.21.3 Deed of Trust between Cross-Continent Auto Retailers, Inc. and R.
Douglas Spedding (3)
10.22 Release and Indemnification Agreement dated as of April 10, 1997,
between Cross-Continent Auto Retailers, Inc. And R. Douglas Spedding
(3)
10.23 Unsecured Promissory Note, dated July 1, 1997, by Cross-Continent Auto
Retailers, Inc. to The Jack Biegger Revocable Living Trust, in the
principal amount of $360,000.00. (9)
10.24 Unsecured Promissory Note, dated July 1, 1997, by Cross-Continent Auto
Retailers, Inc. to The Dale M. Edwards Revocable Family Trust, in the
principal amount of $240,000.00. (9)

10.25 Unsecured Promissory Note, dated July 1, 1997, by Sahara Nissan, Inc.
to The Jack Biegger Revocable Living Trust, in the principal amount of
$275,000.00.(9)
10.26 Unsecured Promissory Note, dated July 1, 1997, by Sahara Nissan, Inc.
to The Dale M. Edwards Revocable Family Trust, in the principal amount
of $125,000.00. (9)
10.27 Documents, dated as of June 26, 1997, relating to line of credit for
Cross-Continent Auto Retailers, Inc. with Texas Commerce Bank National
Association, individually and as agent. (9)
10.27.1 Revolving Credit Agreement between Cross-Continent Auto Retailers,
Inc., and Texas Commerce Bank National Association. (9)
10.27.2 Revolving Note by Cross-Continent Auto Retailers, Inc. and all of its
subsidiaries to the order of Texas Commerce Bank National Association.
(9)
10.27.3 Pledge and Security Agreement between Cross-Continent Auto Retailers,
Inc. and Texas Commerce Bank National Association. (9)
10.28 Dealer Sales and Service Agreement dated July 1, 1997, between the
Nissan Division of Nissan Motor Corporation, U.S.A., Sahara Nissan,
Inc., Cross-Continent Auto Retailers, Inc., and Bill A. Gilliland. (9)
10.29 Environmental Agreement dated July 1, 1997 between Cross-Continent
Auto Retailers, Inc. and The Jack Biegger Revocable Living Trust. (9)
10.30 Separation Agreement dated as of June 20, 1997 between Cross-Continent
Auto Retailers, Inc. and Emmett M. Rice, Jr.(11)
10.32 Documents, dated as of August 7, 1997, relating to the line of credit
for Cross-Continent Auto Retailers, Inc. with Texas Commerce Bank
National Association, individually and as agent.
10.32.1 First Amendment to Revolving Credit Agreement among Cross-Continent
Auto Retailers, Inc.; its subsidiaries; Texas Commerce Bank National
Association; Amarillo National Bank; The Bank of Tokyo-Mitsubishi,
Ltd., Houston Agency; and U. S. Bank.
10.32.2 Revolving Note by Cross-Continent Auto Retailers, Inc. and all of its
subsidiaries to the order of Texas Commerce Bank National Association
in the principal amount of $22,500,000
10.32.3 Revolving Note by Cross-Continent Auto Retailers, Inc. and all of its
subsidiaries to the order of Amarillo National Bank in the principal
amount of $7,500,000
10.32.4 Revolving Note by Cross-Continent Auto Retailers, Inc. and all of its
subsidiaries to the order of Bank of Tokyo-Mitsubishi, Ltd., Houston
Agency, in the principal amount of $5,000,000
10.32.5 Revolving Note by Cross-Continent Auto Retailers, Inc. and all of its
subsidiaries to the order of U. S. Bank in the principal amount of
$5,000,000
10.33 Lease Agreement dated August 15, 1997 between Cross-Continent Auto
Retailers, Inc. and Performance Dodge, Inc.(12)
10.34 Joinder Agreement dated July 1, 1997 between Sahara Nissan, Inc. and
Texas Commerce Bank National Association.

10.35 Documents dated as of September 30, 1997 relating to the loan
agreement between Cross-Continent Auto Retailers, Inc. and R. Douglas
Spedding (omitting exhibits thereto, which will be furnished
supplementally to the Commission upon request).
10.35.1 Master Construction and Master Loan Agreement among Toyota West Sales
and Service, Inc., Douglas Toyota, Inc., Sahara Imports, Inc., and
Cross-Continent Auto Retailers, Inc. as Borrowers, and R. Douglas
Spedding as Lender.
10.35.2 Promissory Note by Cross-Continent Auto Retailers, Inc. to the order
of R. Douglas Spedding in the principal amount of $7,400,000.
10.35.3 Deed of Trust among Cross-Continent Auto Retailers, Inc. as Borrower,
the Public Trustee of Adams County, Colorado, as Trustee, and R.
Douglas Spedding as Lender.
10.35.4 Deed of Trust and Assignment of Rents among Cross-Continent Auto
Retailers, Inc. as Grantor, Old Republic Title Company of Nevada as
Trustee, and R. Douglas Spedding as Beneficiary.
10.35.5 Security Agreement between Cross-Continent Auto Retailers, Inc.,
Douglas Toyota, Inc. and Toyota West Sales and Service, Inc. as
Debtors and R. Douglas Spedding as Lender.
10.35.6 Guaranty by Bill A. Gilliland in favor of R. Douglas Spedding.
10.36 Documents dated August 22, 1997 relating to loans by General Motors
Acceptance Corporation to Cross-Continent Auto Retailers, Inc. and
certain subsidiaries.
10.36.1 Cross Default and Cross Collateralization Agreement among General
Motors Acceptance Corporation and Midway Chevrolet, Inc., Plains
Chevrolet, Inc., Quality Nissan, Inc., Westgate Chevrolet, Inc.,
Sahara Nissan, Inc., and Cross-Continent Auto Retailers, Inc.
10.36.2 Guaranty Agreement between Cross-Continent Auto Retailers, Inc. and
General Motors Acceptance Corporation.
10.37 Assumption Agreement dated August 22, 1997 between General Motors
Acceptance Corporation and Cross-Continent Auto Retailers, Inc.
relating to Performance Dodge, Inc.(omitting exhibit thereto, which
will be furnished supplementally to the Commission upon request)
10.38 Amendment to Office Lease dated October 1, 1997, between Gilliland
Group Family Partnership and Cross-Country Auto Retailers, Inc. (now
named Cross-Continent Auto Retailers, Inc.)
10.39 Amendment No. 1 to Nissan Dealer Term Sales and Service Agreement
dated October 13, 1997, between the Nissan Division of Nissan Motor
Corporation U.S.A. and Sahara Nissan, Inc. d/b/a Jack Biegger Nissan
27.1 Financial Data Table

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(1) Previously filed as an exhibit to the Company's Registration Statement on
Form S-1 (Registration No. 333-0685), incorporated herein by reference.
(2) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996, incorporated herein by
reference.

(3) Previously filed as an exhibit to the Company's Current Report on Form 8-K
dated April 10, 1997, incorporated herein by reference.
(4) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the Quarterly Period Ended September 30, 1996, incorporated herein
by reference.
(5) Previously filed as an exhibit to the Company's Registration Statement on
Form S-8, filed with the Securities and Exchange Commission on March 7,
1997, incorporated herein by reference.
(6) Substantially identical agreements exist between the Chevrolet Division and
each of Midway Chevrolet, Inc. and Westgate Chevrolet, Inc.
(7) Substantially identical Agreements exist between General Motors Acceptance
Corporation and each of Midway Chevrolet, Inc., Westgate Chevrolet, Inc.,
and Quality Nissan, Inc.
(8) Substantially identical Promissory Notes have been executed by Midway
Chevrolet, Inc., Westgate Chevrolet, Inc., and Quality Nissan, Inc., in the
amounts indicated for each dealership subsidiary in the Cross-Default and
Cross-Collateralization Agreement (Exhibit 10.13.3)
(9) Previously filed as an exhibit to the Company's Current Report on Form 8-K
dated July 15, 1997, incorporated herein by reference.
(10) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarterly period ended March 31, 1997, incorporated herein by
reference.
(11) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarterly period ended June 30, 1997, incorporated herein by
reference.
(12) Previously filed as an exhibit to the Company's Current Report on Form 8-K
dated September 2, 1997, incorporated herein by reference.
(*) Exhibits followed by an (*) constitute management contracts or
compensatory plans or arrangements.